Wells Fargo ordered to pay $38 million in damages in stock sale dispute

The ruling and damages award were disclosed Wednesday in the federal Southern District of Texas.

The bank was sued in April 2021 by Occidental Petroleum Corp. and its predecessor Anadarko Petroleum for breach of contract.

The court granted the companies’ motion for summary judgment in August 2022, while denying the bank’s summary judgment request.

At that time, the court said it found that “the evidence indisputably show(ed) that Wells Fargo … accept(ed) Occidental’s recommendation as to when to sell the shares, but failed to execute the sales as agreed.”

“Wells Fargo did not reconsider its decision not to sell the shares; through a series of clumsy missteps, it simply failed to do so.”

The damages award matched the amount Occidental requested. Wells Fargo said the damages ranged from $9.76 million on the low end and $18.53 million on the high end.

“The court holds that the appropriate method for calculating the damages is the difference between the price of the stock on the dates Occidental and Wells Fargo agreed Wells Fargo would sell, and the price on the dates Wells Fargo did sell,” according to the ruling.

At the time of the request, the share price ranged from $41.84 to $47.01, according to MSN.com.

The financial relationship between the companies began in May 1995 when Anadarko created a rabbi trust with Wachovia Bank as the trustee.

Investopedia defines a rabbi trust as an option “to support the non-qualified benefit obligations of employers to their employees.”

Wells Fargo acquired a collapsing Wachovia in December 2008. When Occidental acquired Anadarko in August 2019, the trust held $500 million in assets.

In October 2019, a Wells Fargo investment manager recommended to Occidental selling hundreds of thousands of sales. The companies came to agreement to sell 381,420 shares each day from Jan. 6, 2020, through Jan. 20, 2020.

Only the first set of 381,420 shares were sold during that agreed-upon timeframe, largely because of a series of miscommunications, according to the court ruling.

The remaining 1,114,920 shares were sold in a block on March 20, 2020, at $8.98 a share.

The court ruled that Wells Fargo had breached the contract by not selling the 1.11 million shares as agreed upon during the January 2020 time period.

“Wells Fargo agreed to follow this timing arrangement to reduce the risk of selling all the stock at once, and to reduce the risk of extending the sale dates too far into the uncertain future,” according to the order.

“Knowing these risks and the agreed plan to reduce these risks, Wells Fargo simply failed to execute the sales when and as specified in the agreed plan.

“The risks materialized.”